Crude oil futures stable on Russian data ahead of US stocks report

S&P GLOBAL, PLATTS

Singapore — Crude oil futures were stable to higher during mid-morning trade in Asia Tuesday, with the Brent futures contract largely unchanged on the back of stable production data from Russia and the NYMEX WTI contract edging higher ahead of the release of weekly US inventory reports.

At 10:30 am Singapore time (0230 GMT), ICE November Brent crude futures were down a marginal 3 cents/b (0.04%) from Monday’s settle at $78.12/b, while the NYMEX October light sweet crude contract was 26 cents/b (0.37%) higher than Friday’s settle at $70.06/b. The US market was closed Monday for Labor Day.

“WTI appears to be catching up with Brent’s climb on Monday while the US markets were closed,” said Vandana Hari, founder Vanda Insights. “Brent appears to be taking a pause this morning after touching three-month highs,” she added.

Russia’s crude and condensate production averaged 11.21 million b/d in August, dipping 8,000 b/d from July, when the country cranked up production significantly, according to preliminary data released Sunday by the Central Dispatching Unit, the energy ministry’s statistics arm.

Russia started raising oil output in June after the the OPEC/non-OPEC coalition agreed to ease production caps in effect since 2017. Russia’s production in August was estimated at 253,000 b/d above the level envisaged under the initial production cut deal, energy minister Alexander Novak said Monday. “In September, the output is expected at the level of July, August,” Novak was quoted as saying by Prime news agency.

“Russia is also unable to significantly expand its production which, following an increase in the summer, is now close to its post-Soviet record high,” said Commerzbank analysts in a note. “It therefore remains unclear whether OPEC will be able to absorb a potentially massive fall in Iranian oil exports due to the US sanctions,” they added.

Meanwhile, NYMEX WTI prices were trading slightly higher during the Asian morning session ahead of the release of weekly US crude inventory data, which will be delayed this week by the Labor Day holiday.

The larger-than-expected draw in US crude inventories for the week ended August 24 has been keeping prices supported, analysts said.

Preliminary reports on last week’s US crude inventory levels are due for release by the American Petroleum Institute on Wednesday and the more definitive numbers by the US Energy Information Administration on Thursday.

Elsewhere, analysts from BNP Paribas have lowered their forecasts for oil prices for the rest of the year in light of stable demand-supply expectations.

“We do not expect oil demand to be materially impacted in the next 6-9 months by economic uncertainty linked to US/China trade tensions and recent concerns over emerging markets,” said Harry Tchilinguirian, senior oil strategist at BNP Paribas.

On the impact of the loss of Iranian crude barrels in the market as a result of the US sanctions, Tchilinguirian said that although an initial supply gap was likely to emerge, given average inventory levels in the OECD, the oil market was expected to resolve the supply gap through higher prices.

“We see WTI averaging $68/b in 2018 and Brent at $74/b. In 2019, we see WTI averaging $74/b and Brent at $79/b,” Tchilinguirian added.

Market participants were also watching Tuesday for developments in the US-China trade war, with the US expected to announce another round of tariffs on Chinese goods.

“We might see renewed downward pressure on crude later this week if the US goes ahead with imposing tariffs on $200 billion worth of Chinese imports,” Hari said.